Simon & Schuster - Mba Tuck Dartmouth - Dartmouth College

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Simon & Schuster no. 6-0004 Figure 1: Examples of Changes in the Traditional Book Publishing Supply Chain Publishers Group West Forms Avalon Travel Publishing Tuck School of Business at Dartmouth—Glassmeyer/McNamee Center for Digital Strategies 16
Simon & Schuster no. 6-0004 In July of 2000, S&S agreed to a long-term strategic alliance with Lightning Source, a digital fulfillment service owned by Ingram Book Company. At that time, S&S had the largest collection of e-book titles of any major trade publisher. Lightning Source’s range of services to over 700 publishers around the world included digital file conversion, digital rights management, e-book delivery to various devices and on-demand printing. The Unrealized Promise of E-Products While technology offered the potential to radically change the experience of readers by adding multimedia capabilities, the promise of broad customer acceptance of e-products remained tantalizingly elusive. Estimates of e-book sales by reputable research firms varied widely, leading to a lack of certainty about the timeline and growth of the trend. Arguably one of the top three literary agents in the world, Andrew Wylie was quoted in Financial Times as saying “You might as well forget about the trade publishing e-book market for the time being. It is not a strong business.” 12 He based his statement on the sales results of a novella from one of his author-clients. The e-book rights sold for $80,000 and the publisher sold only sixteen copies. John Feldcamp, the co-founder of online publisher Xlibris, saw only problems. “No one has figured out a good way to distribute e-books or even what to charge,” he said. He added: “Do e-books ultimately win? Yes, absolutely. Do they win this year (2000) or next year? No. This isn’t even slightly cooked yet.” 13 Xlibris allowed authors to retain all publishing rights, paid 50% royalties, and had systems to convert manuscripts into hardback books, paperbacks and e-books within a few weeks. Random House Ventures, the investment subsidiary of Random House, made a significant minority investment in Xlibris. In essence, e-books eliminated printing costs and lowered retail prices, but the real battle was for consumer’s time. Websites and data management tools allowed publishers to better understand the characteristics and habits of book buyers. Figure 2 shows a stylized analysis of book substitutes. Note that compared to substitutes such as TV and newspapers, books had a distinct disadvantage as a medium for advertising. 12 Financial Times, March 20, 2001. 13 The Wall Street Journal, October 2, 2000. Tuck School of Business at Dartmouth—Glassmeyer/McNamee Center for Digital Strategies 17
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Simon & Schuster - Mba Tuck Dartmouth - Dartmouth College

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